Which of the following is a true statement regarding the net present value method in
capital budgeting?
A. it provides the same basic information as the accounting rate of return.
B. it calculates the present value of future cash flows.
C. it calculates the proposal’s rate of return.
D. it doesn’t consider the time value of money.
Which of the following is not usually considered a measure of an entity’s liquidity?
A. Current ratio.
B. Acid-test ratio.
C. Cash ratio.
D. Working capital.
Managerial accounting supports the management process most significantly by:
A. measuring and reporting financial results after the fact.
B. determining the goals and objectives of the entity.
C. helping management identify and achieve goals and measure the degree to which the
goals have been accomplished.
D. establishing operating policies to be followed during a period of time.
A fiscal year:
A. is always the same as the calendar year.
B. is frequently selected based on the firm’s operating cycle.
C. must always end on the same date each year.
D. must end on the last day of a month.
Regardless of the inventory cost flow assumption used, inventories on the balance sheet
are stated at:
A. original cost.
B. realizable value.
C. replacement cost.
D. the lower of cost or market.
Corporate governance includes concerns about:
A. business ethics and social responsibility.
B. the responsibilities of the board of directors.
C. equitable treatment of all stakeholders.
D. disclosures and transparency.
E. all of the above.
April Corporation developed the following per-unit standards for its product: 2 pounds
of direct materials at $3.75 per pound. Last month, 2,000 pounds of direct materials
were purchased for $7,600. The direct materials price variance for last month was:
A. $3,800 favorable.
B. $200 favorable.
C. $100 unfavorable.
D. $200 unfavorable.
If the market price of a bond exceeds its face amount:
A. the coupon rate is less than the market interest rate.
B. the coupon rate is more than the market interest rate.
C. the company’s ROI and working capital have been increasing over time.
D. the maturity rate has been declining.
In consolidated financial statements:
A. the parent’s and subsidiary’s financial statements are reported on a separate basis.
B. the parent’s and subsidiary’s financial statements are reported on a combined basis.
C. financial statements are reported on an industry-wide basis.
D. none of the above.
One of the principal reasons for selecting the LIFO cost flow assumption instead of the
FIFO cost flow assumption in an inflationary economic environment is that:
A. net income will be higher.
B. income taxes will be lower.
C. balance sheet inventory values will be higher.
D. a higher selling price can be established.
Presented below is a partially completed balance sheet for Baldin, Inc., at December 31,
2017, together with comparative data for the year ended December 31, 2016. From the
Statement of Cash Flows for the year ended December 31, 2017, you determine that:
• Net income for the year ended December 31, 2017, was $106,000.
• Dividends paid during the year ended December 31, 2017, were $42,000.
• Accounts receivable increased $14,000 during the year ended December 31, 2017.
• The cost of new buildings acquired during 2017, was $85,000.
• No buildings were disposed of during 2017.
• The land account was not affected by any transactions during the year, but the fair
value of the land at December 31, 2017, is $210,000.
Required:
(a.) Complete the December 31, 2017, balance sheet.
(b.) Prepare a statement of cash flows for the year ended December 31, 2017.
Selling price per unit $100 Variable expenses per unit $40 Fixed expenses per month
$60,000
The break-even point in terms of total revenues per month is:
A. $30,000.
B. $60,000.
C. $75,000.
D. $100,000.
The contribution margin format income statement:
A. results in a larger amount of operating income than the traditional income statement
format.
B. uses a behavior pattern classification for costs rather than a functional cost
classification approach.
C. is most frequently used for financial statement reporting purposes.
D. emphasizes that all costs change in proportion to any change in revenues.
Activities included in a generally accepted definition of management accounting
include:
A. planning, organizing, controlling.
B. planning, operating, reporting.
C. preparing, operating, creating.
D. preparing, organizing, converting.
The most powerful corporate governance legislation to date has been:
A. the Sarbanes-Oxley Act (SOX) of 2002.
B. the creation of the American Institute of Certified Public Accountants.
C. Corporate Ethics Code of 2007.
D. the regulation of inventory management practices by the SEC.
The balance sheet valuation of inventories is:
A. lower of cost or market.
B. lower of selling price or cost.
C. lower of realizable value or selling price.
D. cost, regardless of the cost of replacing the inventory.
Braco has 80,000 shares of $100 par value common stock outstanding, and 20,000
shares in the treasury. The number of additional shares that would be issued in a 5%
stock dividend is:
A. 1,000
B. 2,000
C. 4,000
D. 5,000
The formula for expressing the total of a fixed, variable, or mixed cost at any level of
activity is:
A. total cost = fixed cost + (variable rate * volume of activity).
B. total cost = fixed cost * volume of activity.
C. total cost = fixed cost * variable rate.
D. total cost = fixed cost – variable cost.
Which of the following is an objective of financial reporting by business enterprises?
A. Financial reporting should provide assurance that all liabilities of business
enterprises will be paid.
B. Financial reporting should show the timing and amount of future cash dividends to
potential investors.
C. The primary focus of financial reporting is information about the assets of the entity.
D. Financial reporting should provide information about the economic resources of an
enterprise, the claims to those resources, and changes in those resources and claims to
them.
How is performance evaluated for a profit center?
A. Actual costs incurred compared to budgeted costs.
B. Actual segment margin compared to budgeted segment margin.
C. Comparison of actual and budgeted return on investment (ROI) based on segment
margin and assets controlled by the segment.
D. None of the above.
The balance sheet presentation of accounts receivable net of the allowance for doubtful
accounts has the effect of stating accounts receivable at:
A. original cost.
B. net realizable value.
C. market value.
D. lower of cost or market.
At the end of the year, retained earnings totaled $5,100. During the year, net income
was $750, and dividends of $360 were declared and paid. Retained earnings at the
beginning of the year totaled:
A. $6,210
B. $3,990
C. $3,690
D. $4,710
Standards are likely to be most useful when expressed in:
A. dollars per unit of input to the manufacturing process.
B. quantities per unit of output from the process being evaluated.
C. total costs for the accounting period for the department being evaluated.
D. terms easily related to by the individual whose performance is being evaluated.
The market value of a bond is the sum of the present value of future interest payments
and the present value of the amount to be repaid at maturity, discounted at:
A. the market rate.
B. the coupon rate.
C. the dividend rate.
D. the prime rate.
The contribution margin ratio always decreases when the:
A. break-even point decreases.
B. fixed expenses increase.
C. selling price increases and the variable costs remain constant.
D. variable cost increase and the selling price remains constant.
Which of the following is typically not important when calculating the net present value
of a project?
A. timing of cash flows from the project.
B. income tax effect of cash flows from the project.
C. method of financing the project.
D. amount of cash flows from the project.
Goodwill is an asset that arises because the present value of an acquired company’s
estimated future earnings, discounted at the acquiring firm’s ROI:
A. is less than the fair value of the net assets of the acquired company.
B. is more than the fair value of the net assets of the acquired company.
C. is more than the fair value of the net assets of the acquiring company.
D. is less than the fair value of the net assets of the acquiring company.
Accumulated depreciation on a balance sheet:
A. is part of stockholders’ equity.
B. represents the portion of the cost of an asset that is assumed to have been “used up”
in the process of operating the business.
C. represents cash that will be used to replace worn out equipment.
D. recognizes the economic loss in value of an asset because of its age or use.
Selling price per unit $100 Variable expenses per unit $40 Fixed expenses per month
$60,000
The break-even point volume of units is:
A. 0.
B. 360.
C. 720.
D. 1000.
The Modified Accelerated Cost Recovery System (MACRS) specifies which of the
following depreciation methods for buildings?
A. 150% declining-balance.
B. Double-declining-balance.
C. Straight line.
D. Buildings are not depreciable assets.
The preferred format for a segmented income statement emphasizes:
A. direct and common fixed costs.
B. variable and fixed costs.
C. operating expenses and fixed costs.
D. variable costs and operating expenses.
Which of the following will cause income determined with absorption costing to be
higher than income determined with direct costing?
A. units produced equal units sold.
B. units produced are greater than units sold.
C. units produced are less than units sold.
D. income determined with absorption costing will always equal income determined
with direct costing.
Another term for the price/earnings ratio is:
A. cost ratio.
B. sales multiple.
C. earnings multiple.
D. profit ratio.
The principal challenge to calculating depletion is estimating:
A. the cost of the asset.
B. the salvage value of the exploration equipment.
C. the demand for the product.
D. the quantity of material to be recovered.
As the level of activity decreases:
A. fixed cost per unit decreases.
B. variable cost per unit decreases.
C. fixed cost remains constant in total.
D. variable cost remains constant in total.